BUSINESS IN BRIEF 23/7
TPP agreement facilitates Vietnamese goods
The Trans-Pacific Partnership (TPP) agreement, once realised, will help push forward Vietnam’s market reform, modernisation and integration, said participants at a July 17 seminar on the TPP’s impacts.
Addressing the seminar, Ray Nayler from the US Consulate General in Ho Chi Minh City said the TPP would create many favourable conditions for Vietnamese exports to penetrate the markets of the US, Australia and other TPP members. At the same time, it will help increase the flow of foreign investment into Vietnam .
According to Nayler, besides the increase of export staples such as garment and textiles, seafood, and wood products, Vietnam will also access more markets for its new products such as auto parts and processed seafood, as well as expand trade partnership.
At the same time, participants noted that each TPP member can benefit from the agreement only when they also allow other members to access their domestic markets, as TPP is a reciprocal arrangement.
Ho Chi Minh City Department of Customs said it has adopted electronic customs procedures, which is a practical tool in helping businesses improve competitiveness when Vietnam joins the free trade markets.
The seminar was held by Ho Chi Minh City Business Association, in partnership with Vietnam Union of Friendship Organisation and the American Chamber of Commerce in Vietnam (AmCham Vietnam).
The 18th round of TPP negotiations is taking place in Malaysia from July 15–25.
Negotiations have ended on five of the 29 planned chapters including trade facilitation, telecommunications, small and medium-sized enterprises and have effectively been completed on nine others.-
Premium growth slumps in first half
The insurance market experienced a lower rate of growth in the first half of this year, mainly due to economic difficulties, according to Trinh Thanh Hoan, Director of the Ministry of Finance's Insurance Supervisory Authority (ISA).
The ISA's statistics showed that non-life insurance premiums in the first six months came to a total of 11.8 trillion VND (562 million USD), a rise of only 2.2 percent over the same period last year.
The rise was substantially lower in comparison with the same periods over the last two years, which were recorded at around 20 percent, Hoan said.
Life insurance also struggled to maintain a growth rate of 13 percent, reaching 9.1 trillion VND (434 million USD).
In total, all insurance premiums experienced a growth rate of 6.86 percent over the same period last year, down from the growth rates of 2012 and 2011, which came in at 17.8 percent and 22 percent respectively.
The figures reflected that the insurance market was slowing down, which were mainly attributed to the range of economic difficulties that were adversely impacting on domestic businesses, said Hoan.
According to the ISA Deputy Director Phung Ngoc Khanh, the insurance industry aimed at reaching a total premium of 43.711 trillion VND (2.082 billion USD) this year, a rise of 6.5 percent over last year.
More than 54 percent of this was non-life insurance, which recorded a growth rate of only 5 percent but life insurance is expected to grow at 9 percent.
Experts at the ISA's conference on July 15 to review the insurance market performance in the first half of the year also pointed out that the insurance market is too complicated and managing it is difficult due to the lack of an adequate information system, which will prevent fraud and link enterprises together electronically.
The ISA will upgrade the management regime in the coming months, Khanh said, adding that inspections could also be carried out at some insurance companies, including BIDV Insurance Joint Stock Corp, ACE Life Vietnam and the Vietnam Airlines Insurance Joint-Stock Company.
Figures show that there are 58 insurance companies currently operating in the country, 29 of which are non-life insurance, 13 life insurance, 12 insurance brokers and two are reinsurance companies.
Saigon Airport Plaza completes first stage
Ho Chi Minh City’s Saigon Airport Plaza – a mixed-use project of four components namely apartment, office, hotel/serviced apartment and shopping centre – has launched its first phase.
Available for use are the Blue Sky Apartment, Blue Sky Serviced Apartment, and Blue Sky Office Tower.
The plaza project span on 1.6 hectares next to Tan Son Nhat International Airport, and is less than 30 minutes to the city’s core business district.
It is also in a close proximity to other retail centres and greenery parks such as Hoang Van Thu Park and Gia Dinh Park.
Inside, Saigon Airport Plaza offers a full range of facilities such as a well-equipped gym club, outdoor swimming pools separately for adults and children, a Jacuzzi, spa, garden café and restaurants overlooking an impressive water-show fountain at its heart.
This year’s second quarter saw significant new supply from Saigon Airport Plaza with 84 fully-furnished one-bedroom units, the first Grade B serviced apartment in Tan Binh district, said CBRE Vietnam managing director Marc Townsend. Half of the serviced apartment building is exclusively leased by CBRE Vietnam.
The project’s second phase will be for the construction of four-star Star City Airport Hotel with 240 rooms. The W-shaped hotel will offer connect-to- airport services such as pick-up at the domestic and international terminals, five-minute shuttle bus, and flight check in services.
The project was broke ground in September 2010, and its total investment is $100 million, according to its developer Viet Lien A-Phu Hung Gia, an arm of the SSG Group.
SSG is the developer of Saigon Pearl in Binh Thanh district and Thao Dien Pearl in District 2. Both are home to diplomatic residences and foreign business executives.
Sacombank’s H1 profit exceeds half of target
Sacombank, a major Vietnamese lender, posted its January-June 2013 before tax profit at 52 per cent of this year’s target.
The Ho Chi Minh City-based bank said it reached VND1.448 trillion ($69 million) before-tax profit in the first half of this year. The total assets exceeded VND159.66 trillion ($7.6 billion), up 5.5 per cent at the end of last year. Sacombank added its non-performing loans now accounted for just 2.46 per cent of total outstanding loans.
The bank currently operates 421 transaction offices across Vietnam and in neighbouring Cambodia and Laos.
The State Bank of Vietnam has approved Sacombank’s plan to increase its charter capital by 17 per cent, from VND10.74 trillion ($511 million) to VND12.425 trillion ($592 million) by issuing shares to pay dividends of 2011 and issuing shares to core staff members.
However, Sacombank is seeking to make another capital increase this year, scheduled for completion by the final quarter.
Fitch Ratings early July maintained the ‘B’ notch in the Long-Term Issuer Default Ratings (IDRs) for 4 Vietnamese banks – Agribank, Vietinbank, Sacombank and Asia Commercial Bank (ACB). The US credit rating agency also reaffirmed the ‘stable outlook’ rate in the IDRs for three of them, excluding ACB with a ‘negative outlook’.
Vietnam advised to heed advice on port operations
Port operators in Vietnam were urged to take advantage of opportunities generated by key emerging world trends in order to become more relevant to the market and able to compete with established players.
At the 11th Asean Ports and Shipping Conference in Ho Chi Minh City July 11-12, Accenture, a global management consulting, technology services and outsourcing company, identified five key emerging trends that could help Vietnam.
Won-Joon Lee, Accenture’s Asia-Pacific managing director for automotive, industrial equipment, infrastructure and transportation said that Accenture has two offices in Vietnam. “We are here this week to meet with industry and business leaders to share our research on the port industry and see how we can participate in the growing economy”.
Hong Kong-based Fox Chu, Accenture’s director for port industry, Asia Pacific, said the five trends were dynamic supply chain, impact of automation technology, economic volatility, reduced time for profit maximisation, and talent shortage and immobility.
As for supply chain, he said regional port operators needed to become more customer-centric businesses that could flexibly respond to the needs of shipping lines for a lower cost. They should streamline operations and offer more personalized services for shippers to increase customer loyalty.
Meanwhile, productivity can be increased by 30 per cent through automation, Chu said. As for the third trend, he said uncertain economic conditions required port operators to create agile and streamlined businesses.
For profit maximisation, he stated that port operators need scalable business models to weather a negative cash flow period and speed up the scalability of a business to capitalise on the short profit-making period.
He also remarked that talent shortage was a common problem experienced by all industries, and this could be addressed by standardising processes and IT infrastructure.
The two-day conference revolved around the belief that the regional port industry’s widespread growth has come to an abrupt end as a result of economic stagnation which has made it difficult for operators to maintain high performance.
Regarding building high performance ports, competing in this highly dynamic environment calls for port operators to be more nimble in their operations. They must differentiate themselves in the eyes of customers by rapidly identifying and developing new services that set them apart from competitors. This is especially true in Asian countries such as China, India and ASEAN, including Vietnam.
In view of economic volatility, port operators were also encouraged to adopt flexible cost structures and use external partners to quickly build core competencies. They were also advised to standardise processes and IT infrastructure to build a good foundation for growth.
The conference participants agreed upon the fact that ASEAN consists of port operators at different stages of port lifecycles. Among them, the region’s leader, Singapore, is the most advanced; Malaysia and Indonesia are established; while Vietnam is an emerging port.
Singapore is expected to retain its lead and “exporting Singaporean expertise” will continue to benefit its overseas expansion plans. Vietnamese ports should be near manufacturing areas or import and export hubs, because this will allow operators to secure traffic from nearby factories, ensuring regular vessel visits and ongoing revenue.
The Vietnamese port industry is still facing many challenges that hinder its advancement, said Chu from Accenture. For example, traffic congestion is prevalent in ports located near big cities, and uneven distribution of the shipment loads is seen across ports in Vietnam.
He added that the Vietnamese port sector’s inefficiencies led to higher costs and lower productivity. In 2012, Vietnamese ports operated at just 20 to 30 per cent of their capacity. Meanwhile, a 40-foot container shipped from Hong Kong to Los Angeles is 28 per cent less expensive than the one shipped from Ho Chi Minh City.
Another problem faced by Vietnamese ports is poor cooperation. Chu said this could be improved by entering into partnerships and privatising port businesses especially with worldwide port operating groups for financial and operational support.
Moving forward, Accenture now intends to increase its presence in the local market, said Lee.
Businesses receive support for US market expansion
Mayer Brown JSM Government and Global Trade Group member Nguyen Van Hai has outlined the challenges Vietnamese export products regularly encounter during a conference on US food and drug regulations in Ho Chi Minh Cityon July 19.
He noted major commodities like tra fish, shrimp, plastic bag, and steel oil pipe exports have provoked more than 50 anti-dumping and anti-subsidiary lawsuits in a variety of international markets.
But in spite of the legal action led by the US Department of Commerce and International Trade Commission, the US remains one of Vietnam’s most lucrative markets.
In the first four months of 2013, seven out of Vietnam’s 14 major export commodity groups earned over 15 percent more from US customers than during the same period last year.
To successfully ship their goods to the US,Vietnamese businesses mustminimise the risk of incurring anti-dumping and anti-subsidiary lawsuits by obeying all the country’s import regulations as stringently as possible.
Chitra Ananda, Head Representative of Singapore’s and Malaysia’s Registra Corp, said the US is gradually increasing the quantity of imported consumer goods.
Therefore exporters should study the US Food and Drug Administration’s updated regulations and accept their responsibility for the quality of their products.
Vietnam's US trade surplus hits new heights
Vietnam posted a trade surplus of US$8.3 billion with the US in the first half of the year, representing an 18.5 per cent year-on-year increase.
Statistics from the General Statistics Office showed that Vietnam's exports to the country last year was 116 times higher than that of the same period in 1995, with average annual growth of 32 per cent.
Rising export turnover to the US would help to meet this year's export target of $23 billion.
Vietnam saw 29 staples exported to the US with turnover of more than $10 million each, of which 14 items had turnover of over $100 million.
Garments and textiles took the lead with turnover of $3.2 billion, followed by footwear with $1.03 billion, wood and wooden products posting $710 million, and computer, electronics and components at $479 million. Seafood at $470 million, and machinery and parts at $362 million.
Exports to the US accounted for 18 per cent of Vietnam's total export value.
However, Vietnam's exports accounted for only 1 per cent of US imports, with Vietnam ranking 40th in countries with the greatest export values to the US.
Vietnamese enterprises should pay attention to technical barriers when exporting to the US, especially anti-dumping disputes.
Vietnam's imports from the US last year also grew by 37 times when compared to 1995, with average annual growth of 24 per cent.
Import turnover from the US market in the first six months of the year rose 14 per cent over the same period last year.
The US exported 18 items to Vietnam with turnover of more than $10 million, of which 5 items have turnover of more than $100 million.
Vietnam expected it would post a trade surplus of $17 billion with the US this year, contributing to lowering the national trade deficit. US foreign direct investment in Vietnam during the period was at $10.5 billion, with the US ranking 7th among top investors in Vietnam. The number of US visitors to Vietnam has also increased, with an average of 400,000 arrivals per year since 2007.
US-funded project enhances SMEs' competitiveness
A project to connect and support small and medium-sized enterprises (SMEs) was officially kick-started on July 19 under the sponsorship of the US embassy in Vietnam.
The project aims to offer opportunities for young entrepreneurs to share experiences through consultancy with economists, successful entrepreneurs from major groups and companies.
Hoang Le Vinh, project manager, said the project would also create a forum to connect young entrepreneurs who are enthusiastic about building their careers.
This year, the project will be implemented in the north for 10 months, to help local young entrepreneurs experiment with business solutions and experience.
Vo Tri Thanh, Central Institute for Economic Management (CIEM) Deputy Director said that Vietnamese SMEs lacks strong co-ordination and connectivity, which are weaknesses and a risky factor for the national economy.
To survive and develop in the context of economic turmoil, Thanh said, SMEs should create markets instead of simply selling what markets currently need. In addition, strong connectivity will help them secure a firm foothold in the market.
Launched in October, 2011, the project is one of the 36 worldwide which have been selected by the US Department of State for funding.
Export surplus hits US$85 million in half month
Vietnam’s import-export value in the first half of this month reached US$10.23 billion, bringing the total value in the seven months and a half to US$134.11 billion, up 7.1% from a year earlier.
Of the figure, exports hit nearly US$66.68 billion, up 15% while imports were US$67.43 billion, up 15.2%, according to the General Department of Vietnam Customs.
the trade surplus of US$85 million in the first half of this month helped narrow the total trade deficit to US$755 million in the reviewed period equal to 1.1% of the country’s total export value.
However, exports in the first half of this month, dropped by US$604 million compared to the second half of June. Sharp declines were seen in telephones and components (US$313 million), crude oil (US$96 million), steel (US$39 million), coal (US$38 million) and machinery, equipment and tools (US$34 million).
Garment exports grew byUS$137 million to US$881 million. Exports from foreign direct investment (FDI) businesses reached US$3.15 billion in the first half of July, down 11.2%, while imports were US$3.04 billion, up 1.5% compared to second half of June.
Exports to the UK up 41.6% in H1
Vietnam’s export turnover to the UK reached US$1.76 billion in the past six months, a year-on-year increase of 41.6%, according to the General Statistics Office (GSO).
Telephones and components earned the largest turnover of more than US$611 million, up 79.6%, followed by footwear (US$260.1 million, up 4.6%), and garments (US$205.1 million, up 3.5%).
Notably, computers, export earnings of electronics and components rose 315.5% to nearly US$173 million.
Some commodities such as wood and wooden products, coffee, seafood and ceramics also fetched relatively high growth in revenue.
Meanwhile, some goods saw a decrease in turnover including cashew nuts, fruit and vegetables, iron and steel, and electrical wire & cable.
The Ministry of Industry and Trade (MoIT) reported last year Vietnam earned US$3.03 billion from exporting goods to the UK, up 42 percent compared to 2011’s figure.
The UK is a demanding market as its consumers are interested in health and environmental issues. Vietnamese businesses will make a higher profit if they meet the UK’s strict requirements.
Green growth’s necessary inevitability
It is essential for Vietnam to approach green growth and build green economy to pursue sustainable development goals.
Deputy Minister of Planning and Investment Nguyen The Phuong says the country is faced with a number of challenges in implementing the 2011–2015 socio-economic development plan and the 2011–2020 socio-economic development strategy, particularly in protecting macroeconomic health, environmental preservation, and social welfare.
To achieve the goal, Vietnam must improve the quality of growth, avoid middle income traps and defend itself against the potentially devastating impacts of climate change.
Vietnam is confronting the repercussions of environmental degradation and industry’s reckless natural resource management, unbalanced labour development,, and a rural and urban area wealth gap. Unchecked urbanisation wreaks environmental havoc and can even increase poverty.
Despite noting Vietnam’s specific green growth targets, a World Bank representative recommends that the country focus specific goals such as green growth plans at local levels and strengthening the capacity for institutional supervision of the strategy’s implementation.
Ministries, departments, legislators, and the private sector should coordinate with each other during the implementation process.
Pham Hoang Mai, Head of the Ministry of Planning and Investment’s Department for Science, Education, and Natural Resources, says Vietnam’s national green growth strategy looks to 2050 and targets low carbon growth, green production, and green lifestyles. It sets Vietnam on the path towards carbon usage reductions and greenhouse gas emission minimisation and amelioration.
Experts believe the universal acceptance of green growth guidelines is an inevitable long-term sustainable economic development trend.
Deputy Head of the Ho Chi Minh City Deputies Delegation Tran Du Lich says promoting green growth is an effort to reclaim what has been lost in the drive towards development.
Successfully fostering low-carbon industries and clean technologies is very difficult. Green economic restructuring rests heavily on the effectiveness of Government, ministry, and department macroeconomic policies.
Quang Nam province is one of Vietnam’s green growth leaders. Provincial authorities are consolidating the ecological credentials of Hoi An and Sapa’s green tourism models and sustainable management of the Republic of Korea’s Suwon and green urban development of the US’s Portland.
Quang Nam People’s Committee Chairman Le Phuoc Thanh says the province will soon boast a completed action plan tailored to a green growth roadmap.
Quang Nam will host a green growth forum every two years to evaluate the progress made along this roadmap and adjust the province’s course if developments demand it.
Hanoi has a green growth strategy implementation plan for the 2011–2020 period that will require the united efforts of its citizens and governing institutions.
Hanoi is also targeting rapid and sustainable development, environmental protection, and climate change adaption. It wants to push advanced industry and green technology to 42–45 percent of gross regional domestic product (GRDP), reduce greenhouse gas emissions by 8-10 percent from 2010 levels, increase urban green tree coverage to 10–12 sq.m per person, and secure universal access to safe water. All businesses are encouraged to embrace environmentally friendly technologies and all industrial and processing zones are required to meet waste water treatment system standards.
High hope for expected growth
Gradual economic recovery, reasonable consumer price index (CPI) growth, controlled inflation and stable industrial production are considered positive signs for the national economy to reach its expected growth rate.
Economic experts argue that despite inflation being under control, the government’s year-end management policies should be focused on stimulating economic growth to ensure this year’s 5.5 percent growth target set by the National Assembly (NA).
To reach this goal, GDP in the remaining months must grow at nearly 6%.
In the first half of this year, the country’s GDP saw an estimated 4.9% increase against the same period last year, thanks to significant contributions from economic sectors and GDP growth of 4.76% in the first quarter and 5% in the second quarter.
Apart from economic growth, improved social welfare policies have facilitated low-income earners’ purchase of social housing.
According to Ha Quang Tuyen, head of the Ministry of Planning and Investment (MPI) National Asset Department, it is not an easy task to achieve the 5.5 percent growth target in the current economic doldrums, with declining aggregate demand, an unexpanded scale of production, persistently high inventory and businesses’ difficulties in accessing bank loans.
Consequently, it is imperative to have breakthrough solutions from the Government as well as great efforts from all ministries and sectors.
The first half CPI growth rate of 6.7 percent has basically met the target set by the NA. However, economic experts say that the macroeconomy has not yet developed steadily in the context of possible high inflation.
A recent MPI survey shows that each country’s economy has different inflation rates. For example, the inflation rate of 1 percent for the Japanese economy is reasonable, while Vietnam’s level, ranging from 7-8%, is good for higher economic growth.
Nguyen Huu Thang, head of the General Statistics Office (GSO) Price Statistics Department says growth stimulation is essential, in tandem with ensuring money supply growth and aggregate demand.
The possibility of the return of high inflation requires the Government to focus on keeping inflation in check. This year’s inflation is predicted to stay at a low level, but large increases in investment and disbursement will adversely affect growth rates in the following years, Thang notes.
Aside from the potential for development of the industrial and service sectors, Vietnam remains an attractive investment destination for foreign investors. Therefore, the attraction of more foreign investment will be an effective solution to speed up Vietnam’s future economic development.
Ho Thanh, head of the MPI Department for Construction and Investment Capital, says this year’s foreign direct investment (FDI) attraction has increased in both registered and disbursed capital. Investment contribution to GDP in the first six months accounted for 29.7% and will be estimated at approximately 30 percent for the whole year.
The country is currently focusing on developing infrastructure facilities and investing in high-tech sectors to improve people’s living standards on par with those in the region. For that reason, ‘hot’ growth and increasing investment is evitable, Thanh stresses.
According to the MPI, 2013 can be seen as the bottom and 2014 will see recovery of economic growth under the base of the “U” curve. Therefore, the set 5.5 percent growth rate is a hard nut to crack.
However, advantages have been seen in the second half, such as higher purchasing power, improved banking restructuring and settlement of bad debts and continuously adjusted interest rates, in line with developments of the macroeconomy and inflation.
Mitsui eyes IT parks in Da Nang city
Mitsui company plans to seek an investment opportunity at Da Nang's Hi-Tech Park and Information Technology Park, Ha Noi branch manager of Mitsui, Kazutaka Kiuchi, said.
The company paid a visit to the city on Wednesday to explore the possibility of investment in information technology.
Da Nang has developed the Quang Trung and Da Nang software parks as centralised centres to attract 140 information technology companies and over 2,000 employees.
Last month, the US firm Rocky Lai&Associates started construction of the Da Nang Information Technology Park with a total investment of US$278 million.
Binh Duong to build modern logistics centre
The People's Committee of southern Binh Duong Province has approved a project to establish a modern logistics centre that will boost entrepot trade in the 2015–20 period.
The centre will be built on a 100-ha site in Di An Town, very near HCM City, Dong Nai Province and many ports.
Binh Duong has an annual export-import turnover of US$25billion. The province's warehouses receive more than 72 million tonnes of goods a year.
Copyright violations threaten exports
As the economy continues its downward trend, companies are finding competition - and copyright regulations - have become tighter.
This was revealed in a series of audits and inspections by agencies in charge of companies nationwide in the first half of the year.
The pressure comes not only from Viet Nam. The United States' Unfair Competition Act is also being rolled out in various states in the US targeting exporters.
Raids have been made on a dozen large firms in various Vietnamese provinces and cities in recent months.
The largest check was launched by inspectors from the Ministry of Culture-Sports-Tourism in co-operation with the Hi-tech Crime Police from the Ministry of Public Security at SunWood Vina Co Ltd.
The wholly-owned Korean company, based in Bau Bang IP, Ben Cat, Binh Duong, is in the business of providing and installing fireproof doors -and doors for homes and interior design.
The inspection team said it checked 14 computers being in use at Sunwood Vina Co and found the contained 49 pirated software copies, including Autodesk's AutoCAD propriety design application and many popular office software programmes, such as a Lac Viet dictionary, Windows XP, Office and others.
An officials from the company signed his name on the inspection record, acknowledging the use of copyrighted software without licence.
Economists claim that companies using illegal software have pricing advantages and are engaged in unfair competition against other companies that spend billions of dong on licensed software.
They also say that the use of pirated software also stifles the local software industry and mars the nation's reputation.
At a recent workshop, Vu Manh Chu, former head of the Viet Nam Copyright Office, spoke about the risks companies, including foreign firms, may face when exporting merchandise to international markets.
"A foreign company caught faces the risk of having its exporting rights withdrawn if the importing country knows that it is not using licensed software."
Recently, Indian and Chinese companies exporting textiles were sued in Los Angeles Supreme Court for using unlicensed software to gain undue competitive edge over American companies.
Viet Nam's largest export market is the US, with a turnover of US$8.846 billion, a $1,276 billion growth over 2012.
Commodities sold to the world's largest economy include those from farming, forestry and fisheries, textiles, footwear, telephones, computers and building materials.
Licensed software has become a requisite for all firms wanting to sell in the US.
SBV moves to strengthen foreign exchange market
The State Bank of Viet Nam (SBV) asked all of its branches and local credit institutions to strengthen their forex management in order to further stabilise the local forex market.
Accordingly, all SBV branches must report their forex activities to the central bank prior to the end of August. The SBV also asked other credit institutions to strictly comply with forex regulations.
SBV's report on banking activities from July 8-12 said that US dollar transactions in the interbank market increased from the previous week while transactions of Vietnamese dong decreased.
According to the report, dong transactions reached over VND101.8 trillion (US$4.847 million) while US dollar transactions reached about $4.790 million. Compared to the first week of this month, interbank transactions in dong decreased by 23.6 per cent but the US dollar increased by 52 per cent.
With the exception of last week, US dollar trading between banks has remained high. US dollar transactions between banks jumped 2.5 percent during the last week of June.
The report also said that forex market began to stabilise after the SBV intervened and that the price of US dollar was trending down. Prior to the intervention, the US dollar was trading above the ceiling price of VND 21,246 per dollar, while selling for VND 22,000 on the free market.
Yesterday, the US dollar was trading at its ceiling price of VND21,246 per dollar in most banks, while selling for VND21,500 per dollar on the free market.
VN label lassitude is bad for business
Inaccurate and sloppy labelling are common mistakes Vietnamese firms make when exporting food to the US, and they end up paying a price for them, a conference on exporting food and drugs to the US held in HCM City yesterday heard.
Chitra Ananda of Registrar Corp, a US-based consultancy on compliance with Food and Drug Administration (FDA) regulations, said Vietnamese companies often copy their labels from others and do not always fully comply with FDA regulations.
This is a major problem because when they did not comply or have inaccurate information on labels, the shipment would immediately be stopped for investigation.
"Get it right the first time and not copy labels.
"Do not have general things, only specific things on labels."
Speaking to Viet Nam News, Ananda said: "Vietnamese cuisine has become popular in the US. When consumers care, they would read the label more to check the ingredients before trying further."
At the conference, she also suggested that in addition to information on labels, companies should also pay attention to information in their websites because the FDA reads them to verify consumers' complaints.
They should ideally have a representative in the US who understands FDA regulations and can answer questions if there is an investigation, she added.
Attendees agreed that is not too difficult to follow the FDA's regulations since they are spelled out on its websites.
The conference also discussed other regulations in the US and how to deal with things when being investigated or sued.
The US is one of Viet Nam's biggest importers.
Last year despite the recession, the US bought nearly US$20 billion worth goods from Viet Nam, a year-on-year increase of over 16 per cent.
Some 15-20 per cent of foods consumed in the US originate from other countries.
Tax cuts hit State budget revenue
State Budget collection in the capital city fell by about VND10 trillion (US$476.1 million) during the first half of the year due to the Government's preferential policies on tax exemptions, reductions and extensions.
Thai Dung Tien, deputy head of the city's Taxation Department, said more than 4,500 organisations and households benefited from reduced land-hire taxes, with reductions totalling VND1 trillion ($47.6 million).
The department received 33 applications to extend tax payments on land-use rights. The proposed total amount was VND9.2 trillion ($438 million), accounting for 68 per cent of all land-use rights taxes.
The department assessed 28 applications out of the total with tax extensions on land-use rights at VND1.5 trillion ($71.4 million).
In addition, the department also extended payment on value-added tax during the first three months of this year to more than 13,200 businesses with a total of VND456.4 million ($21,700) in reduced payments.
More than 3,700 businesses also received extensions on payment of corporate income tax, totalling VND61.8 million ($2,900).
About 8,300 vehicles benefited from reduced registration fees in April, with savings totalling VND248 million ($11,800).
In May, more than 8,200 vehicles were given registration fee reductions totalling VND275 million ($13,000). Tax on environment protection for businesses was also reduced by VND26.4 billion ($1.2 million).
Tien said the tax reductions and exemptions reflected the city's efforts to support Government policies for businesses.
However, the department said it would strengthen supervision of taxpayers who enjoyed exemptions, reductions and extensions to prevent businesses unfairly taking advantage of these policies.
PM agrees to regional development programme
Prime Minister Nguyen Tan Dung has passed a 2020 master development plan for the north-central coastal region, according to the Viet Nam Government Portal.
Under the plan, the region will strive to reach a per-capita GDP of US$2,500 by 2020.
By 2015, industry, services and agriculture should make up 41.9 per cent, 39.9 per cent and 18.2 per cent of the region's economy, respectively.
The poverty rate is expected to drop yearly by 2-3 per cent.
Regarding agriculture, specialised cultivation zones will be used to grow high-quality, high-yield products, especially fruit and timber.
Aquaculture, one of the region's major industries, will focus on developing high value products such as lobsters and seahorses. A number of salt fields in Thanh Hoa, Ninh Thuan, Quang Nam and Khanh Hoa will also be expanded.
The industrial sector will focus on areas such as ship building, mechanical engineering, textiles and garments, cement and aquaculture processing. Developing tourism, renovating education and training, and improving healthcare services are also included in the plan.
Interest cuts fail to impress investors
Following the State Bank of Viet Nam's decision to lower the deposit interest rate cap to 7 per cent in June, banks have cut interest rates accordingly.
While many thought this would cause investors to switch to other asset classes like gold, real estate, or securities, this has not happened.
Vietnamese have for long had a predilection for gold as an asset, and prices of the metal are now at the lowest levels in two years, meaning it is an attractive investment option as deposit interest rates plummet.
But two factors are keeping them away from gold – the extreme volatility in prices in recent weeks and the central bank's measures to tighten management whose outcomes remain untested.
Besides, domestic prices remain significantly higher than global prices despite a recent narrowing, and this suggests a further reduction may be on the cards.
Property is another traditional investment channel and here too prices are continuing to slide.
But with the economy yet to turn around, the sector is not thought to be profitable.
That leaves securities, which seem to be pretty now attractive following the market's strong recovery in the first five months.
But it is an inherently risky investment and requires knowledge of companies and their functioning in the absence of mutual funds.
With the other asset classes not yet ripe for inflows, in the short term bank deposits seem the best option.
Interest on deposits of more than one year is still 8-9 per cent, meaning that with inflation expected to be no more than 6-7 per cent this year, real returns will be in positive territory.
Banks lose enthusiasm
In the last few months government bonds were a prime choice for banks with excess liquidity that sought reasonable profits without risks.
But that is changing. With the relentless fall in interest rates, bond yields have become very modest, and banks are less keen on them.
The first six months saw the issue of bonds worth VND78 trillion (US$3.63 billion) or equivalent to the value of those issued in the whole of 2012.
The coupon rates have plummeted by 2.5 percentage points for two-year government bonds and 2 per cent for five-year bonds.
For terms of one and three years they are down by 2.1-2.2 percentage points, and for five – and seven-year bonds by 1.5-1.7 percentage points.
Thus, recent auctions of bonds have proved to be duds, with a mere 2 per cent being bought.
Demand for the bonds is unlikely to pick up this year due to various factors that are at play, according to analysts at the Bao Viet Securities Joint Stock Company.
A significant amount of money is, instead, likely to be used by banks for preferential loans for low-income earners to buy housing.
With the Viet Nam Asset Management Company starting operations and likely to take some of the bad debts off banks, lenders are likely to focus on lending.
After much consideration, McDonald's has finally decided to take the plunge: The US fast-food giant will open its first restaurant in Viet Nam next year.
Though a latecomer to a country where other western brands like Starbuck, Subway, and Pizza Hut have a big presence, it has managed to create a buzz in the market.
Its arrival despite the economic situation shows that Viet Nam's youthful population – more than half the people are aged less than 25 – is a strong attraction for foreign consumer firms.
It is also the culmination of a recent rush by US food companies to the country. Late last year the world's second largest fast-food chain, Burger King, and largest coffee brand, Starbucks, made their debuts.
With all the big boys finally in town, the Vietnamese fast-food market is set for an exciting time, especially for Vietnamese operators.
Last year W&S Online Market Research Company made a survey of the domestic fast-food market and found that the most popular brands are KFC, Lotteria, and Pizza Hut.
KFC and South Korea's Lotteria each have 140 outlets.
But in a market growing at 30 per cent per year, Vietnamese fast-food operators seem indifferent.
As a result, there are a mere handful of them like Pho 24, Vietmac, and Wrap&Roll.
Nguyen Minh Duc of Ha Noi's Viet Nam National University, who researched the market, says: "This lucrative market is the playing field of international brand names.
"Vietnamese fast-food products are still not successful though some have tried to penetrate the market."
The reasons are not hard to see.
Fast-food restaurants are mostly located in crowed places, supermarkets, and shopping malls, generally expensive places to lease.
A prime location is a critical factor for the success of fast-food restaurants. The ability to sustain losses for a long period is another.
Obviously, these take money and Vietnamese investors cannot match the financial muscle of the big chains.
Economic zone grows into industrial centre
The Vung Ang Economic Zone (EZ) in the central province of Ha Tinh has gradually been developed into a large-scale industrial centre serving both the central region and the country at large.
The Government has selected the 7-year-old economic zone as one of five key coastal areas for priority investment during the 2013-15 period.
Situated in an advantageous location for the transport and steel industries, the zone has become the home of many important national projects in the energy, steel and oil refining sectors.
The Vung Ang-Son Duong deep-sea port, the deepest in the northern central region, can accommodate ships of up to 300,000-500,000 tonnes.
It is also located on the main maritime routes to South Asia, North America and Europe. In addition, Vung Ang is a gateway to the sea for the land-locked neighbouring country of Laos.
Sixty kilometres to the north of Vung Ang EZ is the Thach Khe iron mine, which is one of the largest in Southeast Asia. The mine has reserves of 544 million tonnes of iron, accounting for 60 per cent of total national iron reserves. Infrastructure at the mine is under construction, paving the way for the steel industry to develop further in Vung Ang EZ.
More than 200 businesses have been licensed to do business and invest in Vung Ang EZ with total registered capital of US$16 billion.
A number of key projects in the area are close to completion, including the 1,200 MW Vung Ang 1 thermo-electric power plant, which has an investment capital of $1.5 billion, and the Son Duong Formosa steel and seaport complex, which has received initial capital worth almost $10 billion.
Many other large-scale projects are completing procedures for investment licences such as a $12.4 billion refinery, a $5 billion steel plant and the $2.5 billion Vung Ang II thermo-electric power plant.
Additionally, a large number of potential domestic and foreign investors are also seeking business opportunities in the zone.
According to Le Trung Phuoc, Deputy Director of the Ha Tinh Department of Planning and Investment, the locality attaches importance to attracting investment from multinational groups, aiming to access their new technologies and learn more about management.
At the same time, small and medium-sized businesses are encouraged to invest in support industries and services.